LEADERS’ STATEMENTTHE PITTSBURGH SUMMITSEPTEMBER 24 – 25 2009PREAMBLE1.We meet in the midst of a critical transition from crisis to recovery to turn the page onan era of irresponsibility and to adopt a set of policies, regulations and reforms tomeet the needs of the 21st century global economy.2.When we last gathered in April, we confronted the greatest challenge to the worldeconomy in our generation.3.Global output was contracting at pace not seen since the 1930s. Trade wasplummeting. Jobs were disappearing rapidly. Our people worried that the world was on the edge of a depression.4.At that time, our countries agreed to do everything necessary to ensure recovery, torepair our financial systems and to maintain the global flow of capital.5.It worked.6.Our forceful response helped stop the dangerous, sharp decline in global activity andstabilize financial markets. Industrial output is now rising in nearly all oureconomies. International trade is starting to recover. Our financial institutions are raising needed capital, financial markets are showing a willingness to invest and lend, and confidence has improved.7.Today, we reviewed the progress we have made since the London Summit in April.Our national commitments to restore growth resulted in the largest and mostcoordinated fiscal and monetary stimulus ever undertaken. We acted together toincrease dramatically the resources necessary to stop the crisis from spreading around the world. We took steps to fix the broken regulatory system and started toimplement sweeping reforms to reduce the risk that financial excesses will againdestabilize the global economy.8. A sense of normalcy should not lead to complacency.9.The process of recovery and repair remains incomplete. In many countries,unemployment remains unacceptably high. The conditions for a recovery of private demand are not yet fully in place. We cannot rest until the global economy isrestored to full health, and hard-working families the world over can find decent jobs.10.We pledge today to sustain our strong policy response until a durable recovery issecured. We will act to ensure that when growth returns, jobs do too. We will avoidany premature withdrawal of stimulus. At the same time, we will prepare our exit strategies and, when the time is right, withdraw our extraordinary policy support in a cooperative and coordinated way, maintaining our commitment to fiscalresponsibility.11.Even as the work of recovery continues, we pledge to adopt the policies needed to laythe foundation for strong, sustained and balanced growth in the 21st century. We recognize that we have to act forcefully to overcome the legacy of the recent, severe global economic crisis and to help people cope with the consequences of this crisis.We want growth without cycles of boom and bust and markets that fosterresponsibility not recklessness.12.Today we agreed:13.To launch a framework that lays out the policies and the way we act together togenerate strong, sustainable and balanced global growth. We need a durablerecovery that creates the good jobs our people need.14.We need to shift from public to private sources of demand, establish a pattern ofgrowth across countries that is more sustainable and balanced, and reducedevelopment imbalances. We pledge to avoid destabilizing booms and busts inasset and credit prices and adopt macroeconomic policies, consistent with pricestability, that promote adequate and balanced global demand. We will also make decisive progress on structural reforms that foster private demand and strengthen long-run growth potential.15.Our Framework for Strong, Sustainable and Balanced Growth is a compact thatcommits us to work together to assess how our policies fit together, to evaluatewhether they are collectively consistent with more sustainable and balancedgrowth, and to act as necessary to meet our common objectives.16.To make sure our regulatory system for banks and other financial firms reins in theexcesses that led to the crisis. Where reckless behavior and a lack of responsibility led to crisis, we will not allow a return to banking as usual.17.We committed to act together to raise capital standards, to implement stronginternational compensation standards aimed at ending practices that lead toexcessive risk-taking, to improve the over-the-counter derivatives market and tocreate more powerful tools to hold large global firms to account for the risks they take. Standards for large global financial firms should be commensurate with the cost of their failure. For all these reforms, we have set for ourselves strict andprecise timetables.18.To reform the global architecture to meet the needs of the 21st century. After thiscrisis, critical players need to be at the table and fully vested in our institutions toallow us to cooperate to lay the foundation for strong, sustainable and balancedgrowth.19.We designated the G-20 to be the premier forum for our international economiccooperation. We established the Financial Stability Board (FSB) to include major emerging economies and welcome its efforts to coordinate and monitor progressin strengthening financial regulation.20.We are committed to a shift in International Monetary Fund (IMF) quota share todynamic emerging markets and developing countries of at least 5% from over-represented countries to under-represented countries using the current quotaformula as the basis to work from. Today we have delivered on our promise tocontribute over $500 billion to a renewed and expanded IMF New Arrangementsto Borrow (NAB).21.We stressed the importance of adopting a dynamic formula at the World Bankwhich primarily reflects countries’ evolving economic weight and the WorldBank’s development mission, and that generates an increase of at least 3% ofvoting power for developing and transition countries, to the benefit of under-represented countries. While recognizing that over-represented countries willmake a contribution, it will be important to protect the voting power of thesmallest poor countries. We called on the World Bank to play a leading role inresponding to problems whose nature requires globally coordinated action, suchas climate change and food security, and agreed that the World Bank and theregional development banks should have sufficient resources to address thesechallenges and fulfill their mandates.22.To take new steps to increase access to food, fuel and finance among the world’spoorest while clamping down on illicit outflows. Steps to reduce the development gap can be a potent driver of global growth.23.Over four billion people remain undereducated, ill-equipped with capital andtechnology, and insufficiently integrated into the global economy. We need towork together to make the policy and institutional changes needed to acceleratethe convergence of living standards and productivity in developing and emergingeconomies to the levels of the advanced economies. To start, we call on theWorld Bank to develop a new trust fund to support the new Food SecurityInitiative for low-income countries announced last summer. We will increase, ona voluntary basis, funding for programs to bring clean affordable energy to thepoorest, such as the Scaling Up Renewable Energy Program.24.To phase out and rationalize over the medium term inefficient fossil fuel subsidieswhile providing targeted support for the poorest. Inefficient fossil fuel subsidiesencourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change.25.We call on our Energy and Finance Ministers to report to us their implementationstrategies and timeline for acting to meet this critical commitment at our nextmeeting.26.We will promote energy market transparency and market stability as part of ourbroader effort to avoid excessive volatility.27.To maintain our openness and move toward greener, more sustainable growth.28.We will fight protectionism. We are committed to bringing the Doha Round to asuccessful conclusion in 2010.29.We will spare no effort to reach agreement in Copenhagen through the UnitedNations Framework Convention on Climate Change (UNFCCC) negotiations.30.We warmly welcome the report by the Chair of the London Summit commissioned atour last meeting and published today.31.Finally, we agreed to meet in Canada in June 2010 and in Korea in November 2010.We expect to meet annually thereafter and will meet in France in 2011.* * *1.We assessed the progress we have made together in addressing the global crisis andagreed to maintain our steps to support economic activity until recovery is assured.We further committed to additional steps to ensure strong, sustainable, and balanced growth, to build a stronger international financial system, to reduce development imbalances, and to modernize our architecture for international economiccooperation.A Framework for Strong, Sustainable, and Balanced Growth2.The growth of the global economy and the success of our coordinated effort torespond to the recent crisis have increased the case for more sustained and systematic international cooperation. In the short-run, we must continue to implement ourstimulus programs to support economic activity until recovery clearly has taken hold.We also need to develop a transparent and credible process for withdrawing ourextraordinary fiscal, monetary and financial sector support, to be implemented when recovery becomes fully secured. We task our Finance Ministers, working with input from the IMF and FSB, at their November meeting to continue developingcooperative and coordinated exit strategies recognizing that the scale, timing, and sequencing of this process will vary across countries or regions and across the type of policy measures. Credible exit strategies should be designed and communicatedclearly to anchor expectations and reinforce confidence.3.The IMF estimates that world growth will resume this year and rise by nearly 3% bythe end of 2010. Subsequently, our objective is to return the world to high,sustainable, and balanced growth, while maintaining our commitment to fiscalresponsibility and sustainability, with reforms to increase our growth potential and capacity to generate jobs and policies designed to avoid both the re-creation of asset bubbles and the re-emergence of unsustainable global financial flows. We commit to put in place the necessary policy measures to achieve these outcomes.4.We will need to work together as we manage the transition to a more balanced patternof global growth. The crisis and our initial policy responses have already produced significant shifts in the pattern and level of growth across countries. Many countries have already taken important steps to expand domestic demand, bolstering global activity and reducing imbalances. In some countries, the rise in private saving now underway will, in time, need to be augmented by a rise in public saving. Ensuring a strong recovery will necessitate adjustments across different parts of the globaleconomy, while requiring macroeconomic policies that promote adequate andbalanced global demand as well as decisive progress on structural reforms that foster private domestic demand, narrow the global development gap, and strengthen long-run growth potential. The IMF estimates that only with such adjustments andrealignments, will global growth reach a strong, sustainable, and balanced pattern.While governments have started moving in the right direction, a shared understanding and deepened dialogue will help build a more stable, lasting, and sustainable pattern of growth. Raising living standards in the emerging markets and developingcountries is also a critical element in achieving sustainable growth in the globaleconomy.5.Today we are launching a Framework for Strong, Sustainable, and Balanced Growth.To put in place this framework, we commit to develop a process whereby we set out our objectives, put forward policies to achieve these objectives, and together assess our progress. We will ask the IMF to help us with its analysis of how our respective national or regional policy frameworks fit together. We will ask the World Bank to advise us on progress in promoting development and poverty reduction as part of the rebalancing of global growth. We will work together to ensure that our fiscal,monetary, trade, and structural policies are collectively consistent with moresustainable and balanced trajectories of growth. We will undertake macro prudential and regulatory policies to help prevent credit and asset price cycles from becoming forces of destabilization. As we commit to implement a new, sustainable growth model, we should encourage work on measurement methods so as to better take into account the social and environmental dimensions of economic development.6.We call on our Finance Ministers and Central Bank Governors to launch the newFramework by November by initiating a cooperative process of mutual assessment of our policy frameworks and the implications of those frameworks for the pattern and sustainability of global growth. We believe that regular consultations, strengthened cooperation on macroeconomic policies, the exchange of experiences on structural policies, and ongoing assessment will promote the adoption of sound policies and secure a healthy global economy. Our compact is that:•G-20 members will agree on shared policy objectives. These objectives should be updated as conditions evolve.•G-20 members will set out our medium-term policy frameworks and will work together to assess the collective implications of our national policy frameworksfor the level and pattern of global growth and to identify potential risks tofinancial stability.•G-20 Leaders will consider, based on the results of the mutual assessment, and agree any actions to meet our common objectives.7.This process will only be successful if it is supported by candid, even-handed, andbalanced analysis of our policies. We ask the IMF to assist our Finance Ministers and Central Bank Governors in this process of mutual assessment by developing aforward-looking analysis of whether policies pursued by individual G-20 countries are collectively consistent with more sustainable and balanced trajectories for the global economy, and to report regularly to both the G-20 and the InternationalMonetary and Financial Committee (IMFC), building on the IMF’s existing bilateral and multilateral surveillance analysis, on global economic developments, patterns of growth and suggested policy adjustments. Our Finance Ministers and Central Bank Governors will elaborate this process at their November meeting and we will review the results of the first mutual assessment at our next summit.8.These policies will help us to meet our responsibility to the community of nations tobuild a more resilient international financial system and to reduce developmentimbalances.9.Building on Chancellor Merkel’s proposed Charter, on which we will continue towork, we adopted today Core Values for Sustainable Economic Activity, which will include those of propriety, integrity, and transparency, and which will underpin the Framework.Strengthening the International Financial Regulatory System10.Major failures of regulation and supervision, plus reckless and irresponsible risktaking by banks and other financial institutions, created dangerous financial fragilities that contributed significantly to the current crisis. A return to the excessive risktaking prevalent in some countries before the crisis is not an option.11.Since the onset of the global crisis, we have developed and begun implementingsweeping reforms to tackle the root causes of the crisis and transform the system for global financial regulation. Substantial progress has been made in strengtheningprudential oversight, improving risk management, strengthening transparency,promoting market integrity, establishing supervisory colleges, and reinforcinginternational cooperation. We have enhanced and expanded the scope of regulation and oversight, with tougher regulation of over-the-counter (OTC) derivatives,securitization markets, credit rating agencies, and hedge funds. We endorse theinstitutional strengthening of the FSB through its Charter, following its establishment in London, and welcome its reports to Leaders and Ministers. The FSB’s ongoing efforts to monitor progress will be essential to the full and consistent implementation of needed reforms. We call on the FSB to report on progress to the G-20 Finance Ministers and Central Bank Governors in advance of the next Leaders summit.12.Yet our work is not done. Far more needs to be done to protect consumers,depositors, and investors against abusive market practices, promote high qualitystandards, and help ensure the world does not face a crisis of the scope we have seen.We are committed to take action at the national and international level to raisestandards together so that our national authorities implement global standardsconsistently in a way that ensures a level playing field and avoids fragmentation of markets, protectionism, and regulatory arbitrage. Our efforts to deal with impaired assets and to encourage the raising of additional capital must continue, where needed.We commit to conduct robust, transparent stress tests as needed. We call on banks to retain a greater proportion of current profits to build capital, where needed, to support lending. Securitization sponsors or originators should retain a part of the risk of the underlying assets, thus encouraging them to act prudently. It is important to ensure an adequate balance between macroprudential and microprudential regulation tocontrol risks, and to develop the tools necessary to monitor and assess the buildup of macroprudential risks in the financial system. In addition, we have agreed to improve13.As we encourage the resumption of lending to households and businesses, we musttake care not to spur a return of the practices that led to the crisis. The steps we are taking here, when fully implemented, will result in a fundamentally stronger financial system than existed prior to the crisis. If we all act together, financial institutions will have stricter rules for risk-taking, governance that aligns compensation with long-term performance, and greater transparency in their operations. All firms whosefailure could pose a risk to financial stability must be subject to consistent,consolidated supervision and regulation with high standards. Our reform is multi-faceted but at its core must be stronger capital standards, complemented by clearincentives to mitigate excessive risk-taking practices. Capital allows banks towithstand those losses that inevitably will come. It, together with more powerful tools for governments to wind down firms that fail, helps us hold firms accountable for the risks that they take. Building on their Declaration on Further Steps toStrengthen the International Financial System, we call on our Finance Ministers and Central Bank Governors to reach agreement on an international framework of reform in the following critical areas:•Building high quality capital and mitigating pro-cyclicality: We commit to developing by end-2010 internationally agreed rules to improve both the quantity and quality of bank capital and to discourage excessive leverage. These rules will be phased in as financial conditions improve and economic recovery is assured,with the aim of implementation by end-2012. The national implementation ofhigher level and better quality capital requirements, counter-cyclical capitalbuffers, higher capital requirements for risky products and off-balance sheetactivities, as elements of the Basel II Capital Framework, together withstrengthened liquidity risk requirements and forward-looking provisioning, willreduce incentives for banks to take excessive risks and create a financial systembetter prepared to withstand adverse shocks. We welcome the key measuresrecently agreed by the oversight body of the Basel Committee to strengthen thesupervision and regulation of the banking sector. We support the introduction ofa leverage ratio as a supplementary measure to the Basel II risk-based frameworkwith a view to migrating to a Pillar 1 treatment based on appropriate review andcalibration. To ensure comparability, the details of the leverage ratio will beharmonized internationally, fully adjusting for differences in accounting. Allmajor G-20 financial centers commit to have adopted the Basel II CapitalFramework by 2011.•Reforming compensation practices to support financial stability: Excessive compensation in the financial sector has both reflected and encouraged excessive risk taking. Reforming compensation policies and practices is an essential part of our effort to increase financial stability. We fully endorse the implementationstandards of the FSB aimed at aligning compensation with long-term valuecreation, not excessive risk-taking, including by (i) avoiding multi-yearguaranteed bonuses; (ii) requiring a significant portion of variable compensationto be deferred, tied to performance and subject to appropriate clawback and to be vested in the form of stock or stock-like instruments, as long as these createincentives aligned with long-term value creation and the time horizon of risk; (iii) ensuring that compensation for senior executives and other employees having amaterial impact on the firm’s risk exposure align with performance and risk; (iv)making firms’ compensation policies and structures transparent throughdisclosure requirements; (v) limiting variable compensation as a percentage oftotal net revenues when it is inconsistent with the maintenance of a sound capitalbase; and (vi) ensuring that compensation committees overseeing compensationpolicies are able to act independently. Supervisors should have the responsibility to review firms’ compensation policies and structures with institutional andsystemic risk in mind and, if necessary to offset additional risks, apply corrective measures, such as higher capital requirements, to those firms that fail toimplement sound compensation policies and practices. Supervisors should havethe ability to modify compensation structures in the case of firms that fail orrequire extraordinary public intervention. We call on firms to implement thesesound compensation practices immediately. We task the FSB to monitor theimplementation of FSB standards and propose additional measures as required by March 2010.•Improving over-the-counter derivatives markets: All standardized OTC derivative contracts should be traded on exchanges or electronic tradingplatforms, where appropriate, and cleared through central counterparties by end-2012 at the latest. OTC derivative contracts should be reported to traderepositories. Non-centrally cleared contracts should be subject to higher capitalrequirements. We ask the FSB and its relevant members to assess regularlyimplementation and whether it is sufficient to improve transparency in thederivatives markets, mitigate systemic risk, and protect against market abuse.•Addressing cross-border resolutions and systemically important financial institutions by end-2010: Systemically important financial firms should developinternationally-consistent firm-specific contingency and resolution plans. Ourauthorities should establish crisis management groups for the major cross-borderfirms and a legal framework for crisis intervention as well as improve information sharing in times of stress. We should develop resolution tools and frameworks for the effective resolution of financial groups to help mitigate the disruption offinancial institution failures and reduce moral hazard in the future. Our prudential standards for systemically important institutions should be commensurate with the costs of their failure. The FSB should propose by the end of October 2010possible measures including more intensive supervision and specific additionalcapital, liquidity, and other prudential requirements.14.We call on our international accounting bodies to redouble their efforts to achieve asingle set of high quality, global accounting standards within the context of theirindependent standard setting process, and complete their convergence project by June2011. The International Accounting Standards Board’s (IASB) institutionalframework should further enhance the involvement of various stakeholders.15.Our commitment to fight non-cooperative jurisdictions (NCJs) has producedimpressive results. We are committed to maintain the momentum in dealing with tax havens, money laundering, proceeds of corruption, terrorist financing, and prudential standards. We welcome the expansion of the Global Forum on Transparency and Exchange of Information, including the participation of developing countries, and welcome the agreement to deliver an effective program of peer review. The main focus of the Forum’s work will be to improve tax transparency and exchange ofinformation so that countries can fully enforce their tax laws to protect their tax base.We stand ready to use countermeasures against tax havens from March 2010. We welcome the progress made by the Financial Action Task Force (FATF) in the fight against money laundering and terrorist financing and call upon the FATF to issue a public list of high risk jurisdictions by February 2010. We call on the FSB to report progress to address NCJs with regards to international cooperation and information exchange in November 2009 and to initiate a peer review process by February 2010.16.We task the IMF to prepare a report for our next meeting with regard to the range ofoptions countries have adopted or are considering as to how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions to repair the banking system.Modernizing our Global Institutions to Reflect Today’s Global Economy17.Modernizing the international financial institutions and global developmentarchitecture is essential to our efforts to promote global financial stability, fostersustainable development, and lift the lives of the poorest. We warmly welcomePrime Minister Brown’s report on his review of the responsiveness and adaptability of the international financial institutions (IFIs) and ask our Finance Ministers toconsider its conclusions.Reforming the Mandate, Mission and Governance of the IMF18.Our commitment to increase the funds available to the IMF allowed it to stem thespread of the crisis to emerging markets and developing countries. This commitment and the innovative steps the IMF has taken to create the facilities needed for itsresources to be used efficiently and flexibly have reduced global risks. Capital again is flowing to emerging economies.19.We have delivered on our promise to treble the resources available to the IMF. Weare contributing over $500 billion to a renewed and expanded IMF NewArrangements to Borrow (NAB). The IMF has made Special Drawing Rights (SDR) allocations of $283 billion in total, more than $100 billion of which will supplement emerging market and developing countries’ existing reserve assets. Resources from the agreed sale of IMF gold, consistent with the IMF’s new income model, and funds。
